It is proposed to develop an economic theory of demographic transition which integrates microeconomic models of individual and family life cycle behavior into a dynamic macro-level model of overlapping generations. Among other things, the theory suggests that the degree of parental altruism toward children plays an important role in determining whether the family will promote or retard the process of economic development in response to exogenous technical changes and endogenous development of market institutions. Under altruism, the theory implies that increased productivity of human and physical capital due to improved technology will 1) lower the rate of population growth; 2) increase the ratio of physical capital per person; 3) increase human capital per person; 4) increase the period of the life cycle before an individual's net productivity exceeds his consumption; and 5) increase the likelihood that parents will make positive net bequests to their children at death rather than rely on their children for old age support.